The wind and solar power company headquartered in New York and formerly known as SunEdison Yieldco, Inc., TerraForm Power Inc. (NASDAQ: TERP) seem to be gearing up for a surge as per its latest charts.
Bullish Indications
#1 Ascending triangle pattern: TERP’s daily chart shows that the stock is currently forming an Ascending Triangle pattern. An Ascending Triangle pattern is a bullish pattern. This is marked on the daily chart in pink color. The breakout from an ascending triangle pattern generally indicates the start of a bullish trend. The breakout level also acts a good support level.
Daily Chart – TERP
#2 Trading Above MA: The stock is currently trading above both its 50-day and 200-day SMA, which implies that the bulls are currently in control.
[hana-code-insert name=’adsense-article’ /]#3 MACD Above Signal Line: In the daily chart, the MACD line (light blue color) is currently above the MACD signal line (orange color) which is typically considered as a bullish bias.#4 %K above %D: The %K line of the stochastic is currently above the %D line, indicating bullishness.
#5 IH&S Pattern: From the weekly chart of TERP, we can see that the stock has been consolidating in the form of an Inverted Head and Shoulders (IH&S) pattern.
This is marked in the chart below in orange color.
An IH&S pattern is a bullish pattern.
A breakout from an IH&S pattern is usually the sign of an upcoming bullish move.
Weekly Chart – TERP
#6 MACD above Signal Line: In the weekly chart, the MACD line is above the MACD signal line which is a bullish signal. The stock is also trading above its 50-week SMA, indicating that the bulls are still in control.
#7 %K above %D: The %K line of the stochastic is currently above the %D line in the weekly chart as well, indicating possible bullishness.
#8 Bullish RSI moving up: In the weekly chart, the RSI is above 50 and moving upwards. This indicates possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase the shares of TERP if the stock breaks out from the IH&S pattern and ascending triangle pattern at around $12.00.
TP: Our target prices are $15 and $20 based on the breakout from the Ascending Triangle pattern.
SL: To limit risk, place a stop loss near $10.50. Note that this stop loss is on a closing basis.
For a risk of $1.50, the target rewards are $3.00 and $8.00. This is a nearly 1:2 and 1:5 risk-reward trade.
In other words, this trade offers nearly 2X to 5X more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the ascending triangle pattern. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in its sector.
Happy Trading!
Tara
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